The Foot Solutions™ Franchise Four Step Research Approach
The due diligence approach that follows has been used by literally thousands of potential new franchisees over the years. It is designed to push almost all the expense to the end, Steps Three and Four.
Steps One and Two consist of reading the Offering Circular, (the prospectus filled with data registered with both the state and federal governments), and then conducting telephone interviews with at least twenty franchisees. You also contact the franchiser to explain or clarify what you learn from the franchisees. By the time you complete Step Two, you know a great deal about the franchise business.
Steps Three and Four involve visits to franchisees and the home office of the franchiser, and the engagement of local professionals, that is, the franchise attorney and the small business accountant.
Please follow this tried and true approach. It will help you decide whether the franchise will give you what you want, affordably and with safety.
FOUR STEP FRANCHISE RESEARCH PLAN
Overview
What follows is an outline of how to research a Foot Solutions™ franchise. Feel free to adapt this plan to your needs and your style of finding out the information you need. Remember: Only you can make the important decision about owning your own business. Anyone making such a decision needs solid information, but how one obtains it is a personal choice.
Caution: Beware of having your dream “ambushed” either by a spouse whom you have not kept informed and involved, or by well-intentioned but uninformed friend
Remember: Value any opinion only by how informed it is. Ignorant advice, no matter how well intended, is an ambush!
Clients often ask: “How long will it take me to complete the due diligence?” That depends on you. If you are very focused, you may complete the task in about two weeks. Remember, you are researching a small business. It is not complex research! Or it may take as long as three or four weeks, if you prefer a very slow pace. It depends on what you are comfortable with. Let us discuss this, and set a schedule that suits you.
Now, back to the research - this approach has four key elements:
- Read the Offering Circular. List questions for franchisees and your attorney. The role of the franchise attorney is important, but in my opinion, the attorney is not needed to read the Offering Circular, which by law, must be written in “plain English.” (There are tow technical parts, involving financial statements and contracts, and when you are close to a decision, then you involve the professionals, the accountants and attorneys.) Again, attorneys and accountants are not required and are your choice.
- Glean “inside” information from the people who run the business on a daily basis: the franchisees. There is no one better equipped to tell you what you need to know. If approached properly, you will find the majority of the franchisees to be very forthcoming with useful answers. To make the most of your learning, first you will have to conduct telephone interviews and then visit franchisees in their places of business.
- Visit the home office of the franchiser to obtain first-hand impressions.
- Have experienced professional advisers – a franchise attorney and an accountant if you need additional advice and support.
Which franchisees do you contact?
There are several approaches. You might make a purely random selection. Perhaps you might ask the franchiser to suggest people whose background is similar to yours – say a banker talking to ex-bankers. You may wish to talk to owners in markets like yours. If you aspire to a high dollar volume, you may want to talk to high volume owners. One recommended approach is to select franchisees with a range.
Tips
- First, do not begin your research with local franchisees. While they may welcome you as a future colleague, they may also see you as a future competitor for new locations, and discourage your entry. Therefore, first call franchisees at a distance to hear unbiased information. In Step Two, you can call local franchisees.
- The second tip is this: expect to find, and seek out, the unhappy franchisee. Why? Do you know of any human institution composed of 100% happy campers? Of course not! Now, when you find the unhappy franchisee, ask yourself: “Who do I identify with? Is there a reason they are not happy?”
Four Step Research Approach
STEP ONE: Understanding the Fundamentals
(Estimated time – four to five hours.)
1. Read the Offering Circular.
These documents may seem technical, so as you read, compile two lists of questions for the franchiser and franchisees respectively. Highlight sections that you may wish your attorney or the franchiser to explain at a later date.
2. Interview franchisees.
Commit to completing four to eight telephone appointments with franchisees. Do not expect franchisees to stop everything to talk to you, a stranger. Do not expect them to return calls. Ask them when it is convenient for you to call back. View these as structured interviews, and you are the interviewer, but use a conversational tone. Your tone and manner should convey that you are sincerely asking for some help. Remember: The franchisee’s time is valuable - be considerate and make the interview process as concise as possible.
Tip: Take your notes on a copy of the questions for each franchisee you call.
3. Write questions for the franchiser.
Write down any new questions for the franchiser that occur as you speak with the franchisees. When you complete the first round of interviews, call the franchiser to get answers to these questions. Again, take careful notes.
4. Check your level of interest.
Your first step is complete. Now ask yourself: “Am I still interested? Is my interest growing or declining?” No? Then stop! But if you decide to continue your research, then go on to ………
STEP TWO: Confirming the Information You Developed
STEP THREE: Experience the Business Personally
(Estimated time – depends on locations of franchisees.)
Up to this point, you have spent some time and some money on telephone calls – but you have learned a great deal, and from reliable sources. Now you will incur some additional expense.
1. Arrange to visit franchisees.
If any are within a reasonable distance to you. If not and you are serious, move to step four and visit Foot Solutions corporate and stores in Atlanta.
Plan to complete visits with franchisees in their place of business. Prepare by making a list of what you want to learn before you go. The franchisees will know you are a serious person by the amount of investigation you have already completed. Thanks to that research, you are prepared to learn a great deal more.
The unspoken questions you are asking yourself are: “Can I see myself doing this business? Will I like it? Is it what I have been looking for?” Remember: local franchisees may see you as a resource for growing the business or they may see you as a potential competitor for future locations!
2. Check your interest level.
After completing the visits, ask yourself: “Am I still interested?” If so, go on to………
STEP FOUR: Meet Your Future Partners
1. Visit the home office of the franchiser.
Arrange to visit the home office of the franchiser. Also, have your contact person schedule appointments for you with key players: officers, and training, operations, customer service and accounting managers. Treat these as formal interviews by planning what you want to learn. They will be sizing you up, but you should be sizing them up as well! Allow your intuition to answer this question: “Are these the kind of people I want as my (senior) partners?”
2. Obtain qualified, professional advisers.
If you need additional help or advice, may questions can be answered by the franchiser Hire an attorney experienced with franchising. First, ask him or her what the charge would be to review the Franchise Agreement and any other documents. Caution: you hire an attorney for his legal, not his business opinion. Also, hire a qualified accountant to help set up your books, perhaps advise you on financing, taxes, incorporating, etc. If the accountant has other franchisees as clients, that is a bonus. He or she may have some experience with what some franchisers may require for reports and so on.
Conclusion
Now you have a mountain of information and impressions about the franchise. You also have the advice of professionals such as an attorney and an accountant. You are prepared to decide: “Is this for me?” Whether the answer is yes or no, you can be confident that you carried out an intelligent and diligent investigation.
Good luck as you complete your due diligence. Remember: if you do not follow your own dreams, you will end up working for someone who did!
Sample Questions to Ask Franchise Owners
Tips:
- These questions are just suggestions. Add whatever other questions you wish.
- Do not expect franchisees to return calls. Remember, you are a stranger asking for a favor, so ask when you may call them.
- Use a warm, conversational tone, but follow the outline of the questions.
- Write the name of the franchisee, their telephone number, and the date of the call on the top of this sheet.
- Thank the franchisee for his help.
QUESTIONS:
- How long have you been in the business? What is your business background? How would you describe the adjustment to this business?
- How are you doing in your business? Are you working full-time in the business? Do you see your volume growing? What is your best estimate of your annual growth? Do you own, or would you like to own, additional units?
- Does your location meet your customer’s needs? Who picked your site?
- How do you rate the franchisees’ relationship with the franchiser? How do you rate the management of the franchise?
- How would you rate your initial training?
- How would you rate your ongoing support?
- How do you rate the marketing and advertising and promotional programs?
- How difficult is it to find, train and retain employees?
- What do you like best and least about this business?